Understanding Seller Concessions

When you head out to find your first home there will be excitement in the air. Looking at homes will be one of the most pleasurable experiences when you are doing it for the first time. Once you have found the home of your dreams the real work will start.

One of the most significant parts of the home buying process of course is getting a mortgage. Unfortunately, when you are going to be obtaining financing there will be numerous expenses involved. The most significant of these expenses are your closing costs. The closing costs on a home can easily cost you thousands of dollars.

As a buyer who is starting out in life, having all these funds needed for closing can be a challenge. One way you can be helped get into the home you want is by having the seller pay some of your closing costs. The terminology used to have a seller pay closing costs is referred to as a seller's concession. In a real estate contract to purchase a buyer can ask a seller to contribute a set amount of money to contribute toward the buyer's closing costs.

The assistance provided by a seller can often be the difference between a transaction happening or not. A seller's concession becomes more commonplace when buyers are using mortgage programs that have either a low or no down payment requirement. For example, with a VA loan you are able to not put any money down but you will have significant closing costs.

In this scenario a buyer could ask the seller to help them pay the closing costs. What should be made perfectly clear is that just because the seller agrees to contribute towards a buyer's closing costs, it doesn't mean this has to decrease the seller's net proceeds. You can in fact structure the contract such that the seller's bottom line does not change.

Here is a quick example for you to understand what I am talking about. If a seller has their home listed for sale at $425,000 and they really expect to get that price a buyer could offer $435,000 with $10,000 as a seller's concession. By offering ten thousand over asking a buyer, the seller is getting their price while the buyer is also getting their closing cost credit. It is a real win-win!

In the article reference above at Maximum Real Estate Exposure, you will see an in-depth explanation of everything you need to know about seller's concessions. There are some caps on what you can do based upon the mortgage program you will be using.

It will be essential to consult with your mortgage broker or lender to make sure you structure your purchase contract correctly. Take a look at the article and if I can offer any assistance please let me know.